"Manufacturing is not the basket case of political lore, and America really is still "making things." There's another, subtler myth too—that this industrial decline is inevitable, by economic determinism or business mistakes. That's some of it, but the truth is that America would probably be making many more things if not for bad but deliberate political choices.
The manufacturing crisis, if that's the word, has been jobs. Industry employed one of three workers after the war. Today, it's one of eight. Yet this, too, is largely a measure of economic progress—because it is the result of productivity gains. Productivity is the basic measure of how much we can do with our resources, human and monetary, and increasing it is what drives wage gains and higher standards of living.
Real manufacturing output stood at about $35,000 per worker in 1947, in constant dollars. It doubled by 1980 as companies became more efficient. Today this measure is an astonishing $150,000 (see chart above). Manufacturing productivity has increased by 103% since the late 1980s, outpacing every other industry and double the 53% in the larger business economy.
This translates to gains for consumers: Prices for manufactured goods have declined 3% since the 1990s, even as overall prices rose 33%. One reason manufacturing is shrinking as a share of GDP is that its costs are falling—unlike, say, in health care, with its negative productivity rate in the official statistics.
U.S. manufacturing has problems, but it is strong enough to succeed both at home and abroad merely with reforms that all companies ought to enjoy: a corporate tax code with lower rates and fewer loopholes that is competitive with the rest of the world; fewer regulatory hobbles; an education system that better prepares the work force with 21st-century skills; an immigration policy that invites the world's brightest.
This election-year debate will be more constructive if it is less about how to help manufacturers and more about how to fix government."